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What You Need To Know About Bonds In The Philippines

Stocks, UITFs, and Mutual Funds are the typical, go-to investments for Filipinos who are looking for better ways to grow their money. But if you’re looking for alternative, risk-averse types of investments, you might want to consider learning more about bonds.

What is a bond?

A bond is a debt financing contract that allows investors to lend money to a borrower. The borrowers are typically the government or corporations who need additional capital or financing. The amount issued by the investors are paid with interest at a given term, usually at a fixed interest rate.

The borrowers are obliged to pay a stated amount to the investors at the end of a given period. The loan repayment date is called maturity.

There is no pre-termination. If the investor does not want to wait until maturity, they can choose to sell the bonds in the secondary market, through Selling Agents*.

Generally speaking, this form of investment is ideal for older types of investors who are looking at capital preservation, and do not want to get involved with risky forms of investments such as stocks or Mutual Funds.

Four types of bonds according to issuer

1. Treasury Securities. Issued by the Bureau of Treasury. This is ideal for big corporations. The website of the Bureau of Treasury has recently released their 18th Retail Treasury Bond offering with 3.50% interest at quarterly payments. The issue of Retail Treasury Bond (RTB) has a maturity of ten (10) years.

The minimum denomination is at P5,000, subject to the minimum deposit and documentary requirements of the banks or Selling Agents. The offer period was from September 6 to 16, 2016.

For the next round, investors may purchase RTBs from selling agents, and will be required to open an account or designate their existing peso account where the interest and principal payments will be made.

2. Government Bonds. Issued by government agencies, e.g. PAG-IBIG or the Home Development Mutual Fund. The bonds offered by PAG-IBIG are also ideal for individual investments because of their competitive interest rates.

Know something about bonds that we don’t? Share your tips in the comments.

About the author

Kristel Serran Kristel is eCompareMo's go-to gal for all things banking, personal finance, and travel. From time to time, you'll see her showcasing her acting chops and hosting skills because she's talented like that.

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